Guide
How to set a car budget
Start from your monthly budget for the whole car, not the monthly payment, then work back to a price.
1. Pick gross or take-home pay — and be consistent
Most rules of thumb (like 10%–20% of income) use gross pay, before taxes. Take-home pay gives a stricter, more cautious number. Either works, as long as you know which one a guideline uses. A percentage of take-home pay is always a smaller dollar amount than the same percentage of gross.
2. Count the whole car, not just the payment
Your monthly car budget should cover:
- Loan or lease payment
- Insurance
- Fuel or charging
- Maintenance and repairs
- Registration and other yearly fees, divided by 12
3. Subtract running costs, then find a price
Take your total monthly budget, subtract insurance, fuel and upkeep. What's left is the payment you can afford. With a rate and loan length, that payment turns into a loan amount; add your down payment and allow for sales tax and fees to get a target price.
4. Check other debts
If you have student loans, a mortgage or card payments, a smaller car budget leaves more breathing room.
The car affordability calculator does these steps with your debts included. The affordability by salary calculator shows ranges at 10%, 15% and 20% of income, and the true cost of ownership calculator shows what a specific car costs each month.
Educational estimates only — not financial, tax or legal advice. Results depend on the inputs you provide and simplified assumptions. Confirm rates, taxes and fees with lenders, dealers and insurers before making decisions.